The general objectives of the proposed research are: (1) to analyze the consequences of government regulations and public policy on the nursing home industry; (2) to develop an economic model of the nursing home industry by which the effects of alternative public policies can be examined by policy makers; and (3) to determine how qualitative characteristics of facilities such as size and location affect the cost and quantity of output in the nursing home industry. These objectives will be accomplished by utilizing comprehensive data on the quantities of labor and capital used, patient days by class of service provided, and cost and accounting data from 278 facilities in Washington State. The data will be standardized for differences in rental arrangements, accounting practices, and allowances for owner time. The model will explicitly consider the multiproduct nature of industry output and will be developed by applying economic theory and standard econometric techniques to the data to estimate industry production functions.